U.S. factories boosted output last month and December ended up being their best month for growth in five years. Busier factories are helping drive the economy.

The Federal Reserve says manufacturing output increased 0.7 percent in January. And it soared 1.5 percent in December. December's figure was revised sharply up to the biggest gain since December 2006.

Overall industrial production, which includes output by mines and utilities as well as factories, was unchanged in January. Industrial production was revised up in December to 1 percent, the biggest gain in a year.

Utility output fell 2.5 percent last month, the second straight sharp decline due to an unseasonably warm winter. That has allowed many Americans to cut back on heating their homes. Mining production also declined.

Factory output has risen 16.7 percent from its low point during the recession, in June 2009. It is still 7.1 percent below its December 2007 peak.

Two strong months of manufacturing growth are among the encouraging signs that show the economy could grow at a steady pace this year. The pickup in manufacturing coincides with five straight months of solid job growth, which has lowered the unemployment rate to 8.3 percent.

Several factors could weigh on growth this year. Gas prices are rising again. Europe's financial turmoil could weaken demand for U.S. exports. And another year of weak pay increases could force consumers to cut back on spending.

Still, the economy is growing and manufacturing is accelerating. That has helped drive the slow but steady recovery.

The economy grew at an annual pace of 2.8 percent in the final three months of last year, a full percentage point higher than the previous quarter.

Factory activity expanded at the fastest pace in seven months in January, according to a private survey by the Institute for Supply Management. New orders and order backlogs rose at the fastest pace in nine months.

Manufacturing companies have strongly boosted their efficiency in recent years, automating many plants and processes. That's allowed them to produce more with fewer workers.

Still, many are hiring. The government said factories added a net 50,000 workers in January, the most in a year. And manufacturers added a net 235,000 jobs in 2011, the biggest annual rise since 1997.

Another positive sign: the average work week for manufacturing employees increased last month.

A key source of manufacturing strength has come from the auto industry, which is boosting output to meet growing demand. Car sales rose by the most in more than two years in January, after posting healthy sales gains in November and December.